THE ROLE OF DIRECT MAIL IN 2018: PART 1

Key Takeaways:

Household response rates to direct mail are at 5.1% the highest number seen since 2003. These numbers can be attributed to the ability of marketers to Target very specific groups as well as customers just receiving less direct mail overall.

The cost of data and data storage are lower than ever, which makes high-quality data easily accessible. This access to high-quality data decreases the amount of time it takes to produce direct pieces. What used to take months now takes a matter of days.

We live in an omni channel world, your marketing communications from email to direct mail must be cohesive.

Marketing automation is critical in all marketers’ future plans because there are so many quick communications that can be automated that enhance the buying experience.

What follows is a lightly edited transcript of Episode 15 of the Inevitable Success Podcast with special guest host Mike Ferranti and his guest Gary Beck.(Listen Here)

Is Direct Mail Dead?

Mike: Hello, this is Mike Ferranti from BuyerGenomics. I’ll be your host today for this two-part podcast on direct mail and database marketing with our very special guest Gary Beck. Gary is a DM veteran and a tremendous wealth of knowledge we’re very happy to have with us. In part 1: The Role of Direct Mail in 2018, we will give a general overview of where direct mail as a channel stands today, how it has changed, and where it’s headed. We’ll also discuss life stage marketing and affinity marketing and how you could leverage these approaches to positively improve campaigns that integrate direct mail.

Thanks again for being here with us, Gary. So let’s not beat around the bush. Let’s get right to what I think the big question is for all the direct mail skeptics that are listening today. Gary, is direct mail dead and gone? Is it still hanging in there, or might it be becoming the new new thing in the digital age? I ask that question because a funny thing started happening, I would say maybe six months– a year ago, but it continued subsequently, and now on a fairly regular basis.

When we meet with new customers we almost invariably get asked about, “How can I incorporate direct mail into my customer relationship management (CRM) and in my database marketing that I’m going to do with you guys? And, we have some really interesting experience with that, but maybe you could give me your initial reaction, Gary. Is direct mail dead and gone? Is it still dying a slow death, or is it, in fact, the new new thing again?

Gary: Well, first Mike thank you for having me again. It’s a pleasure to be back with you, and let me say that direct mail may be the next channel for marketers to rediscover, and let me tell you why. From everything that I hear, direct mail response rates are going up, and in fact, the Direct Marketing Association recently identified household response rates are at 5.1 % which is the highest response rate the DMA has ever recorded since coming out with their response rate report that they first published in 2000. So the question becomes well, why are response rates going up? And I think there are a few reasons for it.

“5.1% response rate to direct mail. The highest the DMA has seen since they began recording the resposnse rate in 2000.”*

First, direct marketers are getting better at targeting. So by using data more effectively, they understand who their targets are, so they’re wasting less of their promotion budget on those prospects that are unlikely to purchase. So that’s the first reason. The second reason is that customers are receiving less now. So as many people have thought well gee direct mail is expensive. It’s ineffective. And many direct marketers or many traditional marketers have stopped using mail.

The end result is that there’s less clutter in the mailbox. So customers see the mail, and it seems to be more effective. And then I guess, the third reason that I would point to is that not only are mailers getting more effective in terms of their targeting efforts, but they’re also getting much better at personalizing communications and targeting offers to customers. So the end result is that it’s making the mail much more effective, and it is becoming more competitive. In fact, there are some studies that show that it is the most competitive in terms of cost per lead conversion in the marketplace.

Mike: Well that doesn’t sound like direct mail is dead, does it?

Gary:I am quite happy to report that direct mail may be something for everybody to take another look at if marketers believe that it is dead. So when we look at cost per lead comparisons in the marketplace, some people will quickly say, “Well e-mail is the cheapest, but when we look at actual conversions, what we’re seeing according to the Direct Marketing Association, direct mail is actually cheaper than pay per click, than print advertising, than telemarketing, than e-mail.

Mike: Wow. That’s a statement. You know, I think one of the other things that probably is playing into this trend that we’re observing is, there’s often a sort of a label that gets applied on the way to pronouncing anything dead. And I think what happens is, it’s not so much direct mail that is either working or not working, any more than it’s display advertising or retargeting or any other form of communication. It’s direct mail done primitively, direct mail done even poorly that, of course, is going to perform less effectively.

“Some people will quickly say “Well e-mail is the cheapest”, but when we look at actual conversions, what we’re seeing according to the Direct Marketing Association, direct mail is actually cheaper than pay per click, than print advertising, than telemarketing, than e-mail.” – Gary Beck

And it seems that with the explosion of data that is now available, and I think digitization, the Internet, the big data wave if you will, these have all served to make data more accessible/portable. There are more users of it perhaps today than in the past. We surely are finding organizations that were probably too small or not necessarily sophisticated enough or experienced enough to really use data in a meaningful way. They are now starting to do it.

There’s also the advent of many new platforms that make this and create a speed and dexterity with that data and the measurability of the outcomes. I think these things have all combined to give a marketer a greater capability, and I think to be fair, that presumes there are the resources and discipline to test and learn and synthesize those learnings into the next test. But I think this has really helped marketers to get that targeting that you described, that superior targeting, to a place where they could use it, execute, and see the outcome– see the result of it.

Gary: And I think that’s a great point, Mike. The marketing organizations today have a trained workforce that understands how to work with technology. The cost of storage and the advent of the cloud has allowed marketers to access more data than ever before at very low cost. And the new platforms that are out there have increased cycle time so that their results come more quickly, and marketers can capitalize on opportunities with much less lead time. So I think all of those factors have led to direct mail and to targeting becoming more effective.

It wasn’t long ago that direct mailers would planned mailings two months out, three months out because of the need to perform various types of processing, all the control efforts and the fulfillment efforts associated with mail just took time. And today there are capabilities that allow mailers to turn around customized targeted mail pieces in a matter of days instead of a matter of months.

Technological Leaps Paving the Way for Direct Marketers

Mike: You know, it made me think just very recently I was looking over the shoulder of someone here at BuyerGenomics, and they were enhancing a new customer’s file with demographic psychographic lifestyle data. And I recall in the past and the not so distant past that process took weeks before it was all done and correct. And before I finished my coffee, it was done. It was live in BuyerGenomics, and we were using it to target and mass customize messages. And that really was sort of a moment to see how far that’s come. I think what that gets to is, I wholeheartedly agree, for better or for worse, I’m old enough to remember when data storage was a thing and when you paid a lot of money, if you had a big file, just to store it as a marketer.

You mentioned cloud computing and cloud storage, that alone has changed the game, and it’s become a category where pricing for the raw storage only comes down which makes the whole fluidity and accessibility of these marketing data resources much greater. But there’s a second component that I think is enormously important, and that is coupling that kind of access and the speed of having that freshness on the targeting data with a new degree of marketing automation which is made possible of course through cloud computing and software as a service. Surely, that’s been a very central part of what we’ve done, but this is becoming the norm very very quickly.

Gary: And it’s a huge component of CRM strategies that we’re seeing companies execute today. So from a customer relationship management perspective, many companies talk about obtaining a 360-degree view of the customer. And when we think about that 360 degree view, it really wasn’t possible- let’s call it 10 years ago- to the extent that it is today because of the turnaround times associated with data because companies weren’t able to take full advantage of all the data resources and all the freshness of data that they can access today. So…

Mike: I think you might be generous. I think five years ago, it was probably still somewhat challenging.

Gary: You know, I think you’re right. I think that the landscape is changing very rapidly today.

Living in an Omni Channel World

Mike: There are a few omni channel marketing scenarios I would like to discuss with you, Gary. The first would be a true brick and mortar business that some years back, call it 5+ years back, began to truly commit to digital. Now they probably had a website for 10 years or maybe more, but between five and 10 years back, they committed to digital, and they’ve slowly built their digital business. They realize this is where the consumer was headed, and obviously, everybody knows that today. If you’re not succeeding in digital, you’re probably not going to succeed.

That said, brick and click still works, and probably the best major news flash that would support that was when the digital juggernaut that is Amazon bought Whole Foods. If ever there were a statement that the two are inseparable in some ways, one might argue that was it, but there are so many examples of it. Again, even amongst the titans of industry, you have Wal-Mart. There’s a new approach to brick and click coming out from Wal-Mart every day; the acquisition of jet.com. And then we see this at the middle market. We see organizations that are adopting what’s called universal commerce.

And we have business partners that are facilitating this evolution into universal commerce where you can deliver the same experience to the end customer online, in-store, and when they receive communications from you, you speak to them with a singular voice. You can make a purchase in the store, return it by mail. You can make a purchase online, and bring it back to the store. These are some omni channel experiences that are obviously becoming more and more important, and this is where the leaders are headed.

So with that said, your communications probably need to be omni channel as well. And our experience has been that when we can identify things like channel preference, that is what channel should we communicate with a given customer on? Which is the one that will give us the highest response? And then channel sequencing where we identify the channels that work best when used together.

And I think, a really simple example is, we found when we do some combination of email pre-announce followed by a very targeted direct mail piece, it does quite well. So, can you talk for a minute about either experience or maybe your point of view on how omni channel marketing can be served and the goals of omni channel marketing, I should say, can be served most effectively through omni channel communications?

“Our experience has been that when we can identify things like channel preference, that is what channel should we communicate with a given customer on? Which is the one that will give us the highest response? And then channel sequencing where we identify the channels that work best when used together.” – Mike Ferranti

Gary: Well it’s an omni channel world. There’s no question about that. And when we look at the results, and you just mentioned it, Mike, when we combine e-mail with direct mail or direct mail with e-mail or email with direct mail and an e-mail again, so when we combine the impressions that a customer receives, what we see is that there are significant synergies in combining the communication efforts, and email alone versus direct mail alone, if you sum the results from those two separately, it’s going to be much less than when you combine them in a campaign. And this has been seen time and time again.

And in many ways, if you think about general advertising when general advertising started, the goal always was to add more impressions. And if you have multiple impressions across multiple channels, you increase the effectiveness. As a consumer, I am not thinking about one channel or another. Really, what I’m thinking about is my day to day opportunities to engage with retail institutions and with the people around me. So I’m not necessarily thinking about my mobile device, my phone, or I’m not thinking about a laptop, or I’m not thinking about mail in my day to day activities. But it’s the way that all of the opportunities to engage come together that can be effective in creating sales with customers.

Mike: Well, I think there’s one more thing I’d like to cover, Gary. I’ve found that a surprising number of marketers are either in the research stage or the early stages of initiating the use of direct mail as part of an omni channel strategy, and again that’s probably skewed because a lot of the folks that we tend to meet are really focused on heavying up on the drive to digital, but they’re trying to sort out, “Where do I start? Where do I go? How do I get some quick wins?” And what I’ve found is, they just lack some basic fluency in what to expect from omni channel marketing. What is it really? And so maybe a great way for us to help those folks that are listening, why don’t we just give a definition of what is omni channel marketing at its essence?

“As a consumer, I am not thinking about one channel or another. I’m not necessarily thinking about my mobile device, my laptop, or my mail during my day to day activities. But it’s the way that all of the touches come together that can be effective in creating sales with customers.”

Gary:I think that’s a great idea. Omni-channel marketing is the application of multiple sales channels that provides customers with an integrated customer experience, and when we talk about an integrated customer experience, what we’re really talking about is that the messages work together to create an experience. And the messages reinforce themselves as the customer might be shopping from a desktop or mobile device or by telephone or at a brick and mortar store. So there are all of these opportunities, and the goal for the omni channel marketer is to make the experience synergistic across all those channels and support the customer in a way that allows them to have an amazing experience and meets their individual needs as they go through that purchasing process.

Marketing Automation Elevating Direct Mail to the Next Level

Mike: That makes a lot of sense. So with that, maybe we can move to the next big piece of this that we started to discuss before. And that is marketing automation. Our experience has been for years now that- and if I go back a way, maybe 5-6 years ago- we would do custom data modeling enhancement projects where we would work with brands to help them know the customer better through data enhancement, then we would interrogate the data set that we produced. Of course, before we could do any of that, we had to wrestle with the data which was typically siloed for a fairly long time before we got it in a format where we could really do anything exciting with it. We would build models, for example being churn models. We would look at where those customers came from, when we could attach that data together which was definitely not all the time.

And so after we did all of those things, and part of this was the genesis for a massive massive investment that we made in BuyerGenomics, our platform. But sometimes it’s six months later, and the results were terrific. The clients were ecstatic. But in the digital age, six months is a very very long time when you could flight very well targeted Facebook ads in an hour. Look-alike models are easily accessible. You do display targeting and programmatic advertising, and you could flight some pretty impressive stuff pretty quickly. You have your core search portfolio and your search engine marketing budget that if you’ve done a good job that’s just working, and there are areas you could scale that up very very quickly. And so some of these approaches to really bring all this data together and into a strategic asset for the business that you could actually lever. It was taking six months to do.

So marketing automation was, for us, the answer. And for many many of our clients where all of that work or in some cases that 80-90 percent of it is now done on machines all the way through modeling in fact. And so I think marketing automation is something that’s big. A few things I would look at is using automation to personalize or mass customize the content of those communications whether it’s online or offline. One of my favorites is, we do a life-cycle or buyer life-cycle marketing, and we could talk about what that looks like. And the other thing is life stage and affinity marketing. And I think maybe you could kick us off with life stage, Gary for this part of the conversation. But tell me what you think. How do we use lifestyle and enhancement data to improve our omni-channel marketing? And what role do you feel marketing automation has in making it actionable?

Gary: Well, I believe that marketing automation is critical in all marketers’ future plans, and I say that because there are so many communications that we can automate that help clients feel better about the customer experience that they’re going through. We can give a couple of quick examples. And we think about- we’ll go back to Amazon.com and talk about how they managed the product delivery process and when you place an order. So for example when you place an order, they are quick to acknowledge the order. When the product ships they are very quick to let you know that the product has shipped, and when the product arrives, they similarly send you a notice that the product is on your doorstep. So they have been very successful in creating a lot of trust in the sales process for their customers.

So those are all automated messages. They’re very simple messages to deliver. From a life-stage perspective, there are a number of automated messages that might also make sense. So for example, when a customer first sets out after college , they are somebody who has just entered the working world, and they are receiving credit for that first time. When we identify somebody who has entered this new working environment, they are certainly a good target for certain types of communications whether it’s credit communications, new apartment communications… There are lots of communications that they would be receptive to.

“Well, I believe that marketing automation is critical in all marketers’ future plans, and I say that because there are so many communications that we can automate that help clients feel better about the customer experience that they’re going through.”

Similarly, when that same individual gets married for the first time, their life stages change from where they’re living with one person, where they’re potentially living alone to forming a household. And when that same customer has children for the first time, they’ve entered a completely different life stage, and they have very different needs. So when we see indications from various data sources that somebody has changed life stages, that might be the opportunity to trigger a new series of communications for retailers who can recognize that opportunity.

Mike: Thanks for being with us again today. If you enjoyed today’s episode, we’d love it if you would leave a rating and write a quick review on iTunes. And better yet, please share the episode with another marketer you think could benefit in creating their own inevitable success.

*This number was produced by the Direct Marketing Association https://thedma.org/